Elon Musk’s warning that most AI-focused cloud providers could fail and consolidate has heightened investor concerns about the cost of building AI infrastructure.
Shares of several neocloud companies fell in premarket trading on Monday, October 26, 2026, as markets weighed rising debt, mounting infrastructure expenses and questions about profitability.
CoreWeave led the losses, with its shares falling 4.5% in premarket trading. Nebius Group declined 3.4%, while IREN dropped 3.3%. Applied Digital and TeraWulf lost more than 2% each, and Core Scientific fell 1.7%.
In a Sunday X post, Musk predicted a major shakeout across the industry. “200+ neoclouds are going to see guppy-level death and consolidation. Some will make it through, but not many,” he wrote. He also ruled out SpaceX acquiring any neocloud companies.
Neocloud providers such as CoreWeave and Nebius offer computing capacity tailored to AI workloads. Building this infrastructure requires substantial upfront spending on advanced chips and data centers, often financed through borrowing.
Musk said debt markets had ‘almost entirely shut off access to money’ for companies without substantial revenue independent of AI data centers.
The warning follows growing scrutiny of the sector’s borrowing requirements. Research firm Gartner said earlier this month that 80% of approximately 100 neocloud companies could cease operating independently by 2032, identifying CoreWeave as particularly exposed to rising leverage.
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Musk said SpaceX had closed USD 40 billion in debt financing for graphics processing units (GPUs), attributing its access to funding to its investment-grade credit status and revenue from Starlink satellite internet and launch operations. However, it was unclear whether investors had agreed to the debt’s pricing.
Some brokerages expect AI spending to exceed USD 1 trillion next year, intensifying concerns about debt dependence, rapid depreciation of AI assets and potential US Federal Reserve interest-rate increases.
“There is too much debt,” said Alberto Gallo, founder of hedge fund Andromeda Capital, warning that credit markets had become concentrated around AI computing demand.
Bonds issued by Nebius and CoreWeave have hit record lows. CoreWeave, Nebius, and IREN shares have fallen more than 30% this month, generating at least USD 6 billion in paper profits for investors betting against them.